Abstract

Over a decade ago the Committee of Inquiry into Lending
to Farmers (1972:19) reported that the evidence submitted to
us indicated that there has been reasonable availability of
loan finance for creditworthy borrowers. In the mid 1970s
Bayliss and Bayley (1975:6) concluded that farmers borrowing
requirements have been well catered for by financial
institutions. More recently; respondents to a survey of
farmer opinion (Pryde and McCartin, 1983) did not regard
availability of finance as an important factor limiting
expansion of farm output. Although the cost of finance was
regarded as the chief limiting factor its availability was
ranked ninth out of twenty possible limiting factors.
It is the purpose of this Discussion Paper to report
results of a preliminary investigation into relationships
between monetary policy and lending to the agricultural sector
by private sector financial institutions in New Zealand.
Specifically, the objective of the study was to test the
hypothesis that private sector financial institutions do not
alter their portfolio compositions at the margin when the
monetary policy stance becomes more restrictive. If the
empirical results suggest that the hypothesis is true it could
be tentatively concluded that changes to a more restrictive
monetary policy stance are not biased in favour of, or
against, agriculture in the sense that this sector bears a
lesser or greater than proportional burden of any change in
total loans outstanding.... [Show full abstract]